State budget-deficit talks ramp up

Governor, top legislators see compromise nearing

SACRAMENTO – Against a backdrop of IOUs and expanding government furloughs, Gov. Arnold Schwarzenegger and legislative leaders expressed optimism yesterday that they were moving toward a compromise on a budget agreement.

Negotiations to close the state's $26.3 billion deficit restarted after two weeks of inaction and partisan bickering. Top lawmakers from both parties said a budget-balancing deal was possible in the coming week.

“I would say we're getting very close to a general framework, but there are still outlying questions,” Assembly Minority Leader Sam Blakeslee, a San Luis Obispo Republican, after emerging from a closed-door meeting between legislators and Schwarzenegger.

They negotiated for about 2½ hours yesterday before ending talks for the day. Senate Minority Leader Dennis Hollingsworth, R-Temecula, who left Friday's meeting smelling of cigars, stayed on to smoke with Schwarzenegger's chief of staff in the courtyard of the governor's office.

Negotiators were expected to return to the Capitol today.

The talks centered on the extent of budget cuts – which are expected to range from $14 billion to $15 billion – and what other steps might be taken to close the deficit.

Schwarzenegger and Republican legislators also want changes in welfare, pension, health care and in-home, supportive-service programs. They say preventing waste and abuse will save the state money, which in turn can be used to prevent cuts elsewhere in the budget. The governor's office has estimated that its proposals will save $1.7 billion this fiscal year alone.

Democrats have criticized those proposals as peripheral issues that do not have a direct effect on the immediate budget deficit. They also say the governor has overstated the savings. Blakeslee said they would spend part of today reviewing reports on some proposals.

Despite the differences, both Democratic leaders appeared upbeat as they left Schwarzenegger's office after a second round of talks that began Friday night.

Assembly Speaker Karen Bass, who walked out of negotiations earlier in the week, said there did not appear to be any insurmountable obstacles to reaching a deal. Bass described the talks as complicated.

“What has happened over the last 48 hours has been the most productive in the last several weeks,” the Los Angeles Democrat said. “We are just not finished.”

Besides the welfare and social-service revisions, education funding is one of the main negotiating points. Lawmakers are trying to decide to what extent it can be cut. Funding for schools serving kindergarten through 12th grade and community colleges accounts for roughly half of annual state spending.

The possibility of a breakthrough in resolving California's mammoth budget shortfall comes a week after the state began issuing IOUs to thousands of vendors as a cash-saving move. State workers also have begun taking three days a month off without pay.